A furious row has broken out at Los Angeles's leading art institution, the Museum of Contemporary Art, which is pitting some of America's most celebrated aesthetes against a billionaire property developer.

Moca, one of the symbols of LA's recent emergence as an art hub to match New York, is dedicated to the presentation and study of recent art and has long been a home to the erudite and esoteric. But the museum has been hit by the defection of high-profile artist board members furious at a perceived dumbing down.

The conceptual artist John Baldessari was first to resign, followed by agit-prop graphic artist Barbara Kruger and "queer-space" photographer Catherine Opie. Then Ed Ruscha, possibly the city's best known artist internationally, followed suit. Their resignations, they said, could be read as a protest at the commercial, pop-culture direction of the museum at the expense of education and scholarship.

"The artists in LA are very upset," said Hunter Drohojowska-Philp, author of Rebels in Paradise: The Los Angeles Art Scene and the 1960s. "There's a schism between the trustees. It's a complicated situation."

Angry fingers are being pointed at Eli Broad, a billionaire property developer and art collector who bailed out the financially struggling institution three years ago with a $30m donation, and his choice of director, the pop-art minded, former New York dealer Jeffrey Deitch.

With Broad's backing, Deitch, they claim, effectively engineered the removal of the museum's long-serving chief curator, Paul Schimmel, setting up a confrontation between artists and a deep-pocketed collector allied with museum managers charged with raising revenue and exhibition attendances.

Art in the Streets, a Deitch-orchestrated survey of the graffiti and street art movement, drew a record number of visitors. That was followed by a retrospective of Dennis Hopper's artwork. Earlier this year, the actor James Franco curated a show that drew inspiration from Rebel Without a Cause.

"Jeffrey represents a populist streak that many in the art world consider vulgar. He goes for spectacle more than scholarship," says New York art critic Carlo McCormick. "They feel he's dumbing down the cultural values of the art world."

And behind that, many suspect, is a billionaire whose motives are not entirely clear. While Broad saved Moca and wants to keep it viable, he is also constructing a rival museum across downtown LA to house his own collection.

In addition, the original trustees of the museum have been bolstered by big-money figures such as hedge fund whale Steven S Cohen and Victor Pinchuk, a Ukrainian who collects Damien Hirst. "The influence of collectors is probably at an all-time high," says McCormick. "Art is highly professionalised and market-determined at every level."

LA artists expressed dismay that educational aspects of the institution have been cut from the budget and said they worried that Moca was becoming "a cliche of Los Angeles or a part of the entertainment industry. We want to know the direction of the museum and to know that curators are respected and their shows are being funded."

LA art critic Mat Gleason said: "Deitch is actually inoculating the museum from conflicts of interest with high-wealth collectors." By putting on more pop-culture orientated shows, "he can go to low-level donors and say, 'We throw really cool parties, why don't you donate to us?' " In response, Deitch wrote to museum members saying the institution's programme was "a response to and an articulation of the current art and cultural landscape today". Moca, he said, would continue to engage audiences in a "dynamic and scholarly way".

Friends of Deitch say he's tired of being criticised for placing pop art or shows about disco culture ahead of cutting-edge art. But they also say he's perfect for Los Angeles because it is a city "wrapped up in celebrities and celebutantes".

It's the artists, then, who may have to accept that they live in an entertainment town. "But, of course, they're freaked out that people like James Franco are getting exhibitions because it's not serious and it doesn't matter," says a Moca supporter.

Artists, however, not collectors or institutional managers, may still have the final say. "If showing at Moca means selling out, then no one is going to want to show there," says one.

• This article was amended on 23 July 2012. The original wrongly gave the location of Eli Broad's rival museum as Wilshire Boulevard.